Q&A

It’s been an utterly devastating fire season in California, so I wanted to talk about what happens on the appraisal side of things after such a disaster. This isn’t something that people ever think about until they have to, but now is one of those times. I figured this would help home owners with questions and it would help give real estate professionals a resource to dig deeper.

Today I’m interviewing Penny Woods, an appraiser colleague based out of Pleasanton CA with 30 years of experience (see bio below). Penny knows her stuff and she has vast experience with post-disaster appraisals.

Ryan: Tell us about your experience with post-disaster appraisals.

Penny: In October 1991 the Oakland firestorm totally destroyed 2,800+ single family homes and an additional 400+ townhomes. I worked for an appraisal fee office that had a major insurance company as a client with over 500 total loss properties. For the next 7+ months one other appraiser and I did nothing but retrospective fair market valuations for structures that were completely destroyed. At that time, insurance policies were written and paid out on “Market Value”, but this fire changed that. Now they are written and pay out based on “Replacement Cost”.

Ryan: When is an appraisal ordered after a disaster?

Penny: Appraisals after a disaster can be ordered at different times for different reasons. When it is safe to return to the fire damaged property the insurance company will start the process to get their replacement cost (Cost Approach) valuation. Additional appraisals may be needed by the property owner following the insurance company’s initial replacement cost valuation for: property tax assessment reductions, to challenge/rebut the insurance valuation, IRS causality loss tax claims, or for other types of civil litigation.

Ryan: How does an appraiser value a home if it is no longer there?

Penny: As with any retrospective valuation, some of the research is exactly what the appraiser would do for any assignment and some of it is very different. Data sources include: public tax records; planning department plans and permits; old MLS listings; the lender may be willing to provide an old appraisal, the data collected by the insurance company, an in-depth talk with the property owner; and don’t forget family photos! Yes family photos are usually still available at the homes of grandparents, aunts & uncles, and family friends. You’d be amazed how much information is available in a photo from Johnny’s birthday party or a holiday dinner.

Ryan: What date of value is used during the appraisal?

Penny: The initial appraisal is a retrospective valuation, which means the value is usually for the day immediately before the fire loss. Any subsequent appraisals may use the same retrospective date or post fire dates depending on the use/purpose of the valuation. An appraisal for a property tax reassessment would use a date after the property had been damaged. This could be the day after the fire or a more current date depending on the assessment dates. To challenge/rebut the insurance company’s valuation would require the same retrospective valuation date used by the insurance company. If the property owner needed to provide information to the IRS for a casualty loss claim there would be 2 valuations, “immediately before” and “immediately after”. The IRS “immediately before” value is the retrospective before the fire and the “immediately after” date can mean up to 2 years from the date of the loss to allow for time for the general clean up and/or recovery. If there was additional civil litigation the date or dates would be specific to the cause of action.

Ryan: What type of information does the owner need to provide to the appraiser?

Penny: As much as possible!!! Appraisers, for you to be able to complete a credible appraisal you need to have as much information from the property owners as they can provide. This could be a difficult process because you will be working with people who are in a very emotional situation. Be patient, and professional. Understand that if you are doing a lot of this type of work it may also become a very emotional and/or stressful situation for you too.

Ryan: Does the appraiser focus on the value of the structure or the land too? In other words, what is the insurance company really asking for?

Penny: The insurance company is looking for the value of the onsite structures that have been destroyed. The land is still there and not insured so the insurance company only wants the value of the structures. With the other types of valuation assignments we have been discussing it is a case by case situation, some will need separate land valuations and some won’t.

Ryan: What did you see happen to the market in Oakland during the big fire in the 90s? Did it collapse, stall, decline, etc…?

Penny: The Oakland fire occurred in October of 1991. This was a time throughout the country where the economy was in a decline. In the Bay Area the decline could be tracked from the Loma Prieta earthquake in October 1989 and continued through the mid 1990’s. It is difficult to say how much of the decline that occurred in the Oakland and Berkeley Hills was directly related to the fire and how much was the overall declining market trends. There was also a unique situation where the majority of the properties that before the fire had nice wooded views or little “peeks” of the San Francisco Bay suddenly had partial to full bay views! That alone increased the value of these properties. It was a slow process to rebuild, a total of 700 permits for new construction had been issued 1 year later and none of them had actually started to build. Again some of that could certainly be attributed to the overall economy. I believe that each market will react differently depending on the extent of devastation and the specific economy of the surrounding area.

Ryan: Any advice you’d give to owners who just lost a home?

Penny: While your life is certainly disrupted beyond most of our imaginations, don’t rush! Be sure you know what all of your options are before taking any major steps. Consult professionals in each of the fields where you have questions and need information and help.

Ryan: Any advice for appraisers too?

Penny: These disasters could be a large source of potential business. You must first remember that you are benefiting from other people’s major losses, so always be as professional as possible! Not every appraiser has the temperament to take on this type of work, but it can also be very rewarding helping the fire survivors rebuild their lives even if it doesn’t involve a move to a different location.

Ryan: Thanks so much for doing the interview. You killed it. Everyone, if you need an appraiser in Penny’s area, please reach out to her.

Penny’s Bio: B. Penny Woods, owner of BPW Appraisal & Realty Service based in Pleasanton, CA, has been working as an appraiser for the past 30 years, coming from a background of property management and real estate sales. She got her start in appraising by working for a fee appraisal firm; obtaining appraisal experience with both residential and small commercial properties. In 1994 she started her own firm and now does only residential appraisal work. Penny specializes in the unique and unusual properties, completing assignments for lender financing, probate, divorce, estate planning, litigation & expert witness testimony, earth movement, fire damage, and insurance claims. Penny’s phone #: 925-485-0641

I hope this was helpful and interesting.

Questions: Do you have any questions? Any stories to share? How have you seen the market change after a fire or disaster? I’d love to hear your take.

Storage container units are all the rage on HGTV, but they’re starting to pop up in real life too. So let’s talk about them. Today I have an interview with James Roberts who handles design and engineering at TAYNR, a container home builder in Sacramento. I hope this will be insightful and interesting. Anything to add? Let’s talk in the comments.

Ryan: What got you into the storage container business?

James: I first became aware of “shipping containers” when I was a Signalman in the US NAVY. Seeing them in different commercial ports was common. After the NAVY I moved to Miami Beach where I met Sujan (Project Manager at TAYNR), and we would see shipping containers on large cargo ships, cruising in and out of the Miami Port all the time. But Denmark was the first container build I ever saw. And then London had container condos and a shopping center. Thailand, Laos, Korea Japan, Mexico, Costa Rica, Brazil all have many small pop-up businesses, single family homes and commercial buildings. During recent visits to China and Hong Kong, I saw new construction sites with 100s of containers modified for worker housing.

Ryan: What type of buildings can you make out of containers?

James: The possibilities are endless. The ISBU (Intermodal Steel Building Unit), the shipping container, is manufactured to carry heavy cargo of all kinds, to be stacked, and withstand extreme weather conditions while being transported across the seas. With that said, they are incredibly strong, and if modified correctly, they can be used for an endless amount of structures. Australia has been using containers for housing and commercial structures for 40+ years. America has recently (+/-10 years) started to use this building method for single family and multi-family homes, commercial store fronts, popup food stations, business marketing structures, etc. The worker housing units would be an excellent source for all means for temporary housing in the US. Emergency, migrant, farm, homeless, camping, etc. The list can go on.

Ryan: What is the maximum number on stories you can do?

James: They are manufactured to stack on top with the weight bearing on the four corner posts. It is common to see them free-standing 6 boxes high at the port. This is without reinforcement or anything securing them together. You can imagine that with additional engineering and structural support, this could easily be doubled, possibly tripled.

Ryan: Tell me about the accessory unit you built in Oak Park (the blue unit below).

James: Matt and Jamie Leonardo contacted me in late 2016. They bought their Oak Park home a few years before and had worked up some equity. Originally there was a non-permitted home along the back alley way that had to be torn down in order for their loan to be approved. Replacing this structure for a revenue generating dwelling was pretty much in the plan from the beginning. I do not remember where/why they decided to build with a shipping container, but we met, discussed a plan and moved forward. This home will actually be showcased on an upcoming episode of You Live In What, premiering June 29th at 9 pm on Great American Country Network (GAC), an HGTV affiliate.

Ryan: Do units get extra hot on the inside because of the steel exterior?

James: No, our units are meant to perform extremely efficient by design. By nature, corten steel will absorb the heat from the sun. This is a factor that is taken into consideration from the beginning and we have many different ways to address this. For instance, the Oak Park container home is insulated on the inside and has reflective paint on the outside. Also, a weather barrier and facade were installed on the exterior of the container to allow for a 6?+ thermal break. The roof has a 3:12 sloped standing seam roof with 3’6? eves to provide additional shade along with the insulation and weather barrier laid out inside the roofline, and it has 2 mini-split for heating and air.

Ryan: What type of units do you find most clients are asking for these days?

James: Our highest demand for individuals is an ADU (Accessory Dwelling Unit) that can be installed in existing backyards for in-law quarters, guest homes, or as a rental unit to capture additional income. The TAYNR models are designed to be “building blocks” offering both 20′ and 40′ multi-block models. 1, 2 & 3 bedroom units with 1 or 2 baths.

Ryan: How long does it take to install an ADU?

James: Foundations can be installed in 1 day, and installation of the ADU is typically 5-10 business days depending in the model size.

Ryan: Is it fairly easy to get a storage container unit permitted?

James: “Easy” is absolutely not how would describe it. However, because we have our pre-designed models and engineering understood, this does simplify our process.

Ryan: Do you know if there is a limit to how many units can be added in a backyard?

James: Any residential lot in California can have one ADU as long as the property setbacks and design review conditions can be met. So far the only issue I have run into is physical access, which TAYNR now offers an alternative modular product that can usually meet this conflict.

Ryan: Have you found some areas not willing to allow containers because of design restrictions?

James: Usually this is due to the City/County design review. Some areas require the ADU be cohesive with the existing structure. As long as budget allows, this is not an issue because we can design a facade to satisfy this point.

Ryan: So far I’m not aware of any stand-alone single family container units in Sacramento. Have you heard about any yet?

James: There currently is not a stand-alone unit in Sacramento. Stay tuned… we have one in the works.

Ryan: Are permit fees any different for containers compared to stick-built homes?

James: No, they are not. Our builds are required to meet the same building codes and are permitted the same as a traditional build.

Ryan: Anything else you want to add?

James: One of the biggest misconceptions is that building with containers is “cheap”. This is not the case. Although there are absolute savings if the build process is followed properly. Meaning, the onsite work should be performed while the ADU is being built in the factory, so the overall start-to-finish construction is significantly reduced, saving you a lot in labor cost.

Ryan: Thanks for doing the interview. You killed it. Everyone, please check out TAYNR’s website. All photos in this post are TAYNR projects (images are property of TAYNR).

CLOSING APPRAISAL THOUGHTS: Container homes are an emerging trend in the market, so it’s important to stay in tune with this phenomenon. I’m excited to hear TAYNR is building a stand-alone home too because that’s not something the market has seen yet. It’s worth noting one of the struggles with stand-alone container homes is the potential of financing hurdles: 1) The unit might not be large enough in size in the eyes of the lender; and 2) A lender might ask an appraiser to use container comps to show the market accepts this type of property. Well, right now there aren’t any comps (yet). But the market is craving alternative products like this, so lenders over time will hopefully adapt to this emerging trend.

Questions: What do you think of container homes? Any insight or stories to share? Loan officers, any tips on financing? I’d love to hear your take.

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